STOCK SECURITIES
STOCK SECURITIES
Should I switch my 401k into Governement securities or wait out the stock market problem?
Govt securities guarantee 4.5%. Right now I am invested 80% International Funds, and 20% Large and Small CAP STOCKS.
I am 34 so I'm right in the middle of the road here.
(Jan. 23 morning): I personally would not move money out of the markets now. In fact, I just moved some IN. The goal is to buy stocks at a low price and sell them at a high price. Selling after a huge drop means selling at a low price. The best time to move out of stocks is when they've been hitting new highs almost every day for a month or two. Selling after a big drop generally means missing out on the big rise that follows.
With many years to go until retirement when that money will be withdrawn, I don't think there's any need to worry even if the market drops more from here. In the past, the markets have ALWAYS recovered from drops, no matter how large, to go back to new record highs. Sometimes it takes only takes months, sometimes several years, but it's never taken 30 years which is the time horizon a 34 year old is looking at for a 401(k) investment.
Look at this chart of the S&P 500 since 1950: http://finance.yahoo.com/q/bc?s=%5EGSPC&t=my&l=on&z=l&q=l&c=
The long-term trend is consistent and clear - UP! Look at 1987 when the market crash occurred. It just looks like a small blip now on the long-term chart. Look at what's happened after that. People that sold after the crash missed all of that rise afterwards.
Personally, I think 80% in International is high, though I'm sure that's done well over the past year or so, but at age 34, I would be 100% in stocks of some kind.
Update (Jan. 23 evening): Today's a good example of why selling during a big drop in the market is a bad idea. Anyone that sold yesterday or this morning missed out on huge gains this afternoon (and probably more to come in the next few days).
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